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Middle East & African Monitor - 06 March 2017

  • Libya’s largest oil export terminals shut as fighting erupts
  • Former Nigerian CB Chief criticizes government’s economic policies
  • Hot on the heels of Oman’s bond sale Kuwait also prepares to issue
  • Egypt to receive US$500 Mio in financial aid from Germany
  • Kenya’s latest PMI highlights slowdown
  • S&P revises Qatar outlook to negative
  • Iran ponders investment in South African refineries
  • USD/EGP edges higher again

REGIONAL COMMENTARY

Libya’s largest oil export terminals shut as fighting erupts
Crude exports from Libya’s two largest ports, Ras Lanuf and Es Sider, have been suspended following a renewed outbreak in fighting last week. A group calling itself ‘The Benghazi Defence Brigades’ reportedly took partial control of Es Sider from the Libyan National Army last Friday but clashes at both facilities are continuing. Meanwhile evidence that Russia could be seeking to expand its influence within the MENA region came via the news last week that Moscow has offered to mediate between Libya’s two rival governments. This offer appeared following a meeting between the head of the Tripoli administration, Fayez Sarraj, and the Russian Foreign Minister, Sergei Lavrov. A statement issued by Russia’s Foreign Ministry read; "Moscow confirmed its readiness to work closely with all sides in Libya with the aim of seeking mutually acceptable solutions to create the grounds for the stable development of Libya as a united, sovereign and independent state." This meeting occurred not long after Russia’s state owned oil company signed a cooperation agreement with Libya’s National Oil Company, which itself was announced just a few days after the UK’s Defence Minister warned Moscow that it should avoid interfering in the Libyan situation.

Former Nigerian CB Chief criticizes government’s economic policies
A former head of Nigeria’s Central Bank, Charles Soludo, has accused the Buhari administration of making a bad economic situation even worse. “Nigeria is now, some say a fragile state, some say a failed state; it is not going to be a tea-party to come out but unfortunately, we are not taking it seriously. Nigeria is not just in recession but in a massive economic compression; it will be a miracle for the present APC administration to return this country to the dollar size it met in May 2015, if it stays for 8 years, that’s till 2023. It is business as usual; propaganda, lies, double-speak. Current government is fighting corruption, insecurity, but we say to them, enough of the blame gain, they inherited a bad situation but they have made it several times worst; getting us out here is not a tea-party like I said before. Nigerians should rise in unity, it should no longer be ‘let them,’ only united citizens can rescue Nigeria out of this position,” Soludo was quoted as saying late last week by the Daily Post newspaper, adding; “If we don’t rise to hold them by the jugular, Nigeria cannot go anywhere, we have to start preparing for a post-oil economy, insanity is to repeat the same thing over and over again and expect different result.” In response to his accusations a spokesperson in the Presidency said; “What the former Central Bank Governor Soludo cannot deny is the fact that the Buhari administration has ended the bleeding of the nation and is implementing reforms. This administration is spending more on infrastructure at a time when resources are lean, when we had abundant revenues what happened was profligacy and plunder. Nigerians have demonstrated that they know the Buhari administration inherited a sorry state of the economy but is working diligently to fix it with positive results now emerging.” Soludo was CB governor from 2004 to 2009 and is a professor of economics.

Hot on the heels of Oman’s bond sale Kuwait also prepares to issue
Kuwait kicks off its 5-day bond roadshow today and expectations are for a US$7-10 bio issue in the 5Y and 10Y tenors. This news follows soon after Oman conducted a larger than expected 3-tranche bond issuance last week with orders skewed towards the longer tenors. The total amount of the Omani issue was US$5 bio and split as follows: US$1 bio in 5Y at 190bp over mid-swaps, US$2 bio in 10Y at MS+300bp and US$2 bio in 30Y at MS+387.50 bp. Demand reportedly came in at just under US$20 bio.

Egypt to receive US$500 Mio in financial aid from Germany
In a statement issued last Friday, Egypt’s Ministry of Investment and International Cooperation announced that the German government had offered to provide the country with up to US$500 mio in the form of grants and concessional funding to support Egypt’s current economic program especially with initiatives aimed at boosting the SME sector.

Kenya’s latest PMI highlights slowdown
The ‘Markit-Stanbic Bank’ Kenya’s PMI index dipped to a new low of 50.1 in February from 52.0 the previous month. This slowdown is being attributed to the ongoing region-wide drought, and declining levels of private sector credit. For those of you who may not have seen it yet our latest snapshot on the Kenyan economy can be found here.

S&P revises Qatar outlook to negative
Standard & Poors has lowered its sovereign credit rating outlook on Qatar from stable to negative although it affirmed its current long term AA rating. The agency said in a statement that the change in outlook reflected a risk that the country’s external position could deteriorate if growth in external debt continued to outpace external liquid asset growth.

Iran ponders investment in South African refineries
Iran’s Oil Minister, Bijan Namdar Zanganeh, was quoted by his country’s state-run media yesterday suggesting that Iran was ready to begin exporting up to 100,000bpd of crude to South Africa, and that it was also interested in learning more about South Africa’s home-grown gas-to-liquids technology and perhaps buying a stake in certain refineries there.

USD/EGP edges higher again
After hovering below the 16.00 level against the US Dollar for almost two weeks, the Egyptian pound finally succumbed to a resumption of hard currency demand pressures late last week and weakened back to the 16.40/50 level. This was not really a surprise, especially as there is still a reasonable USD order backlog from various client sectors. With this in mind we expect USD/EGP to move back towards the 17.50-18.00 area in the interbank spot market over the next few weeks which in turn could trigger renewed interest in Egyptian assets (equities and bonds) from overseas investors again.

06-03-2017

AND FINALLY…
“The fruit of silence is tranquility” – Arabic proverb. 

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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NBAD Middle East & African Monitor - 06 March 2017

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